Q. Consider the following statements:

Human capital formation as a concept is better explained in terms of a process which enables

  1. Individuals of a country to accumulate more capital.
  2. Increasing the knowledge, skill levels and capacities of the people of the country.
  3. Accumulation of tangible wealth.
  4. Accumulation of intangible wealth

Which of the statements given above is/are correct?

  • (a) 1 and 2
  • (b) 2 only
  • (c) 2 and 4
  • (d) 1, 3 and 4

Answer: (c) 2 and 4

Notes:
  • According to the OECD, human capital is defined as: “the knowledge, skills, competencies and other attributes embodied in individuals or groups of individuals acquired during their life and used to produce goods, services or ideas in market circumstances”. 
  • Human capital formation refers to the process of adding to the stock of human capital over time. It is the process of acquiring and increasing the number of skilled and experienced people. It is essential for the development of an economy.
  • Intangible wealth of a nation comprises of the skilled population, human resource base, culture, arts etc.
  • Human capital formation is the outcome of investments in education, health, on-the-job training, migration and information.
  • As per RBI, Gross capital formation refers to the ‘aggregate of gross additions to fixed assets (that is fixed capital formation) plus change in stocks during the counting period.
    • Tangible capital is also GCF is it involves largely infrastructural components.